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Gap Insurance

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

What is Gap Insurance, how much does it cost, and do you really need it?

Bridging the Gap of Depreciation with Gap Insurance - The 360 Bridge - Austin, Texas

Bridging the Gap of Depreciation with Gap Insurance The 360 Bridge - Austin, Texas

Gap Insurance is unlike any other consumer insurance policy. Why? Because it covers the part of your car that only banks would think about: depreciation. That’s the part that goes down every month you own your vehicle. Still confused? Let me explain.

What is Gap Insurance?

You’ve probably heard it said, “once you drive a new car off the lot, it’s worth thousands of dollars less.” It’s true. Say you visit your local Nissan dealership. That new Altima is screaming your name, so you buy it. After handing over your down payment, the salesguy hands you the keys to your new ride. You just bought a $22K vehicle, but once you’re home, you could only sell it for $18,000. That missing $4,000 ($22,000 – $18,000) is the depreciation you incur by merely relocating the vehicle.

Unfortunately, a regular auto insurance policy does not cover a car’s depreciation. If, on the second day of owning your Altima you total your car, the insurance company would only pay you the actual cash value (ACV) for the car, or $18,000. But the bank still wants all the money you borrowed. Where are you going to come up the extra $4K? That’s why you need gap insurance, also called loan/lease gap coverage. If you want to cover the depreciation of your vehicle for the life of the vehicle, then get gap insurance. It sometimes even pays for your deductible.

How Much Does It Cost?

Since you’re not paying to insure your entire vehicle, a gap insurance policy is not as expensive as regular car insurance. However, since the policy is basically all-risk coverage, it’s not exactly cheap either. If you shop around, you can pay a one-time premium of $300 to $700. The price depends on the amount financed and sometimes the terms of the loan or lease. There are caps involved, but most new vehicles are eligible for gap insurance. Check with your finance company for an easy quote.

Do You Really Need Gap Insurance?

There are a couple of reasons why you might want gap insurance. For one, if you owe a significant amount on the car you should consider it. How much money? Dave Hurt, who sells gap insurance with Car Select, says, “Anyone who buys a car and finances 80% of the purchase price should buy Gap Insurance.” That’s probably a good guideline.

Second, you should consider gap insurance if it’s early in the life of your loan or lease. If you owe more money than your car is worth, you’re considered ‘upside down’. Gap insurance could ease you out of an ‘upside down’ situation if you total your car. It may not be required by your finance company, but it’s not a bad decision in certain circumstances.

It’s worth mentioning that gap insurance is not for every car. If you have an older vehicle, gap insurance may not be available for it. Check with the company who writes the gap insurance policy if you’re curious about your particular vehicle.

Finally, check to see if your finance company already includes gap insurance with the auto loan. When I worked with State Farm, their bank automatically included a gap insurance policy for new car purchases. True, their auto loan rates could be higher than dealer financing, but it was an added benefit of their auto loans.

If you have an experience with gap insurance, feel free to leave a comment.

How to Shop for Car Insurance

Written by Todd Clay. Posted in Research Last Updated: 04/10/2012

4 Easy Steps to Getting the Best Rate With The Best Company Every Time

How to Save Hundreds When Shopping for Auto Insurance.

How to Save Hundreds When Buying Auto Insurance.

Finding out how to shop for car insurance isn’t hard. But if you do it wrong, you could waste time, get frustrated, or worse, lose money. When I say a lose money, I’m talking thousands of dollars a year. It’s worth taking some time to learn the process. If you do, you’ll shop smarter, save some cash, and get peace of mind knowing you did it right.

Stop Wasting Good Money

In case you don’t think it’s worth your time, consider a normal driver in Texas. (Your state will be different, but the example still applies.) The Texas Department of Insurance publishes auto rates from all the insurers in the state. In 2008, a married 35-yr old driver in Dallas County with no accidents or tickets could pay anywhere between $243 and $1128 for a 6 month policy. The same driver with the same coverage could pay $1770 more per year because they didn’t shop their car insurance – almost two grand! Unfortunately, this is not uncommon.

That’s why it’s so important to make sure you’re getting a good deal. You may love your agent, but think about this: Your agent gets a commission from every extra dollar you waste with their company. If you don’t look out for yourself, your agent won’t do it for you. That money is yours – don’t just give it away. Here’s what you need to do.

Step 1: Pick Some Car Insurance Companies

Not every auto insurance company is worth your business. You need to find a few other companies to compare. How do you get a list of companies?

Ask around. Ask your friends who insures their cars. They’ll let you know if they’ve had a good or bad experience. Don’t want to ask around? Then check out some customer reviews. Collect a list of some auto insurance companies you want a quote from. I suggest you pick at least 3, but preferably 7 companies to compare. That way you get a healthy sample for the best possible savings.

Step 2: Narrow Your Choices

Once you have your list, check two other things. First off, financial strength. Various ratings agencies measure the financial stability of insurance companies. A.M. Best and Standard and Poor’s are the most prominent agencies. You can look up each company’s financial rating at your state’s department of insurance.

Second, ask the question: do those companies advertise? Companies that advertise are typically growth-oriented companies. This is a positive trait since you don’t want to send your premium dollars to a company that isn’t motivated to gain your business – how will they treat you when you have a claim. If you haven’t heard of one of the companies on your list, then it may not be a good fit.

Step 3: Getting Online Quotes

Go online for auto insurance quotes. Why? Because it takes too much time driving around, sitting in offices, or even jabbing on the phone with salespeople. The process takes long enough without any unnecessary steps.

The quickest way to get multiple quotes is to use a ‘quote aggregator’. It takes a few minutes to fill out a questionnaire. At the end, you can see quotes from several car insurance companies, and you’ve only filled out one form. I’ve included a link to make it easy for you: Online Quote Aggregator

After that, grab quotes from the remaining the companies on your list. Use a search engine to find the company websites. Auto insurance quote instructions should be very prominent at those sites.

Step 4: Confirm Online Quote Over the Phone

Now you have some quotes, it’s time to confirm the price. For your best auto insurance quotes, make a couple of phone calls to the general company number. Again, a search engine is helpful here. You can also call a local agency if that makes sense. Tell them about your online quote. If they can’t access it, answer the questions again.

There’s no reason to make 5 phone calls. You’ve already narrowed down the companies using the previous steps above. If you’re happy with the first quote on the phone, then buy the policy. Make sure it’s in effect before cancelling your current policy. Chances are you saved enough money to pay yourself a few hundred bucks for your time. After all, where else can you pick up an extra few hundred to a thousand bucks for a couple hours of work?

If these steps helped you shop for car insurance, leave a comment to help others in their search for a cheaper company.

Motorcycle Insurance

Written by Todd Clay. Posted in Research Last Updated: 03/23/2011

7 Essentials for Motorcycle Insurance: The perfect introduction for anyone considering a bike.

Ready to Ride?

Ready to Ride? Don't forget your insurance binder.

Before you get motorcycle insurance, consider this situation:

You can almost smell the open road.  That down payment is burning a hole in your pocket.  You’ve been eyeing that new soft-tail for months, and you’re ready to plunk down a wad of cash and ride into the sunset.

Before you buy that new Harley Screamin’ Eagle or Ducati 848, you need to get motorcycle insurance.  In fact, dealers won’t even let you drive your new bike off the lot until you provide them proof of your bike insurance, called a binder.

I spoke with Darla Mason at Wild West Harley-Davidson in Lubbock, Texas, about motorcycle insurance.  “You gotta have it.  Unless you’re paying cash, you’ll need a binder from a company before you can take the bike.”

Besides simply needing motorcycle insurance, what should you know?  I found 7 things riders should know when shopping for coverage.

1. Good Driving Has Its Own Rewards

All at-fault accidents and tickets count.  It doesn’t matter if you just picked up your bike, motorcycle insurance companies count every incident you’ve had (usually in a 3-year period) even if it’s in your car.  Stay clean and you’ll pay less money for your motorcycle insurance.

2.  Get Comprehensive and Collision

Every motorcycle insurance policy includes basic liability.  But unless you’re paying cash for your bike and you don’t mind losing the bike in an accident, get “full-coverage” for your new ride.  Collision covers your bike if you’re in an at-fault accident and comprehensive covers your cruiser in any incident other than collision.  Both coverages pay out minus your deductible.

3. Gap Insurance – What’s That?

Comprehensive and collision coverage in your motorcycle insurance only pay out what your bike is worth at the time of the accident.  If you total your bike and you owe more than your bike is worth, then you’ll still owe the balance on your financing.

Gap insurance is different from motorcycle insurance.  Gap insurance covers the ‘gap in coverage’ between what your bike is worth and what your insurance company pays after a total loss.  Finance companies typically offer this coverage.  Get it if you’re worried about paying extra if your bike is totaled.

4. Where Do You Ride and Where Do You Park?

You may just ride on the weekend – if so, tell the agent who gives you a quote.  Whether or not you commute to work on your bike can make a big difference for the price of your motorcycle insurance.

Same with where you park.  Additional discounts can be available whether or not you store your bike in a garage.  We all know how unattended bikes have a tendency to ride off by themselves – it makes sense for motorcycle insurance companies to give a discount to owners of garaged bikes.

One more bonus for riders in northern states.  You could be eligible for a “lay-up” policy, where most coverage is suspended during the winter months.  That translates to extra money in your pocket.

5. Motorcycles Need Chrome Coverage?

Motorcycle insurance usually does not cover additional parts like chrome air filters or saddlebags.  If you want extras like paint jobs or sidecars covered, then make sure you talk to your agent about additional equipment or optional coverage.  There’s nothing like losing your favorite custom mirrors (and then some) after laying down your bike only to find out they weren’t covered under normal comprehensive.  Make sure all your extras have coverage.

6. Get All Your Discounts!

If you’ve taken a motorcycle safety course, you could be eligible for a 10-20% discount.  When you’re getting quotes for your motorcycle insurance, ask about discounts.  That could be another $100 in your pocket at the end of the year – it’s definitely worth asking.

7. Shop Around – Big Time!

This is the most important part to getting the cheapest motorcycle insurance.  After going through this checklist and getting a quote, do it again.   The more quotes you get, the more money you’re likely to save.  Darla Mason said some of her customers save $500 after shopping their motorcycle insurance.

At the least, get 3 quotes from reputable motorcycle insurance companies.  You can also check with your current car insurance company – though they’re not always likely to have the best rates for motorcycle insurance.  Make sure each company quotes the same coverage, then go with the best.  If you want to shop online, get a quote for motorcycle insurance here.

After getting your binder, you’re ready to go.  Turn the key, hear that sweet hum of the engine, then give her some gas.  But don’t go too fast…I was an insurance agent after all.

Do you ride?  If so, you may have some additional tips for other bike owners.
Feel free to leave a comment.

Low Cost Car Insurance

Written by Todd Clay. Posted in Research Last Updated: 12/01/2010

8 Proven Tips on Lowering Your Car Insurance Costs so you don’t have to take out a second mortgage.

How can you save money on your car insurance?

How can you save money on your car insurance?

Does low cost car insurance even exist?.  Just think about what you could buy every month if you didn’t have to shell out those auto insurance bucks.  A nice steak dinner or a new gadget – but instead your making your car insurance company rich off your premium checks.

Don’t worry.  There are several things you can do you lower your car insurance costs – to get cheaper car insurance.  We’ve put together 8 proven tips to lower your auto insurance costs.  Try them out.  Forget about the 15% GEICO says they’ll save you.  These tips could save you 50% or more on your car insurance costs… and I’m no caveman.

Tip #1: Shop Around

All kidding aside, GEICO could save you 15% on your car insurance costs.  But you’ll never know unless you ask.  If you haven’t shopped your policy in 12-18 months, then you’re probably paying too much.

According to our latest research, California drivers paid +257% more for a basic liability auto insurance policy from the most expensive company versus the cheapest car insurance company.  That’s 2½ times more for auto insurance!  Need I say more?  Shop around for a better rate, and lower your costs.  If you need several prices, get some quotes here.

Tip #2: Be A Safe Driver

Take it from someone with a ‘reckless driving’ hidden in his distant past – bad driving is expensive.  Add a couple of at-fault accidents to that record and you’re looking at a towering monthly car insurance bill.  Car insurance costs are directly related to the risk the auto insurance company takes when writing a policy. If you’re a bad driver, then the company is taking a bigger risk.

Slow down.  Watch those red lights.  Drive defensively.  If you clear up your driving record, and get incident-free for three years (no tickets & no at-fault accidents), you’ll see a substantial drop in your costs.

Tip #3: Raise Your Deductibles

A deductible is your portion of the car insurance.  The lower your deductible on comprehensive and collision coverage, the higher your auto insurance costs.  In other words, if you have a $50 deductible on collision coverage (which covers your car’s physical damage in case of an at-fault accident), then you’re probably paying too much.

If you have the savings to cover your deductible, then raise your comprehensive and collision coverage to $500 or $1000.  Ask your agent about the savings and you’ll be surprised on how this money-saver will help your auto insurance costs.

Tip #4: Drop Comp and Collision on Your 10-Year Old Car

This one is related to #3.  If you drop comprehensive and collision on your car insurance, then you’re taking responsibility for physical damage to your vehicle.

This one only works if you can afford to replace the vehicle and you’re not financing it.  Ten year old cars have usually depreciated enough where many people can afford to replace it if necessary. If you’re one of those people, then dropping comp and collision will lower your auto insurance costs significantly.

Tip #5: Clear Up Your Credit

Each car insurance company handles credit differently.  Many companies don’t check it once you’re with them.  However, almost all companies check your credit when you’re shopping for auto insurance.  If you have delinquencies, and other such issues on your credit report, try to fix them.  Clearing up your credit can have a significant impact on your costs.

Tip #6: Sell Your Sports Car

Alright, I know this doesn’t apply to everyone.  But if you’re strapped for cash and that Porsche payment is eating your lunch, you might want to consider selling it and buying a more affordable car.  Auto insurance costs will go down significantly depending on the car you’re insuring.  I’m not saying ‘buy a jalopy’, but you could sell your Viper to help your cash flow.  Plus, you’ll lower your car insurance costs in the process.

Tip #7: Review Your Policy with Your Car Insurance Company

If you’ve shopped your auto insurance policy recently, it’s still good to review your costs with your car insurance company.  Make sure you’re taking advantage of all the discounts available to you like: Multi-car discount, Multi-policy discount, Driver’s Education/Defensive Driving, and even, good driver discounts.

I’m not saying your insurer is pilfering you.  But they sometimes miss these discounts when signing up people for coverage.  Make sure you’re getting all the discounts coming to you when buying auto insurance.

Tip #8: Shop Your Car Insurance… Again?

I said it before, but it’s worth repeating.  There’s no easier way to get shave car insurance costs than to get several quotes.  Even if you ignore the other tips, don’t ignore this one.  No need to pay extra money for the same coverage.  Take the time and save some money.  Once again, get some quotes here.

Then have a steak dinner on me.
Can you think of anything else that can save others money?
Leave a comment for other drivers.

Compare Car Insurance and Win

Written by Todd Clay. Posted in Research Last Updated: 08/13/2017


4 Secrets to Finding the Best Auto Insurance for the Best Price Every Time

Comparing Car Insurance

Comparing Car Insurance

Before you compare car insurance put down that phone.

It’s 2008.  You don’t have to call every car insurance company in the phone book.  The internet has revolutionized the way we buy things, especially car insurance. Want to compare companies?  It’s never been easier.

No more visiting dingy offices only to be pressured to sign a policy you don’t need.  If you want to compare insurers – you’re in the driver’s seat today.

Just because it’s easy doesn’t mean you can’t mess up.  You need to know a few things about the process while getting quotes.  These four secrets will help you make a smart decision as you compare car insurance quotes.

1.  Where Do I Start?  – Pick a Few Good Companies

The first step to getting the best car insurance at the best price is to find some good auto insurance companies to compare.  Many states have over 50 companies doing business there.  How do you choose which ones to compare?

I recommend finding 3-7 auto insurance companies that advertise.  Why?

Companies that advertise are interested in growing their business.  That’s important since they typically believe retaining current customers is good for business.  That’s why they usually treat you well when you have a claim – when it counts.  If you’ve heard of the company, then they’ve spent money on advertising.  That means they’re a good company to compare.

(If you want more direction, check out our Car Insurance Rates to compare prices for the cheapest companies.)

2.  Get Quotes: Grab Several-Printed Car Insurance Quotes Online

Now you have a several companies (3-7) to compare, it’s time to get some quotes.  If you want to do that online, get your quote here.

Here’s where it gets a little tricky.  Make sure you’re comparing the same quotes.  Determine what kind of coverage you want – state-minimum liability, comprehensive, collision, or whatever.  If you need some help with the details, ask the first company you talk to.  Then, whatever, the first company quotes you…

*Get the same quote from every other car insurance company.*

This is very important.  You’re trying to compare prices for the same thing.  If you compare the same quotes, it’s like going to one grocery story and asking for a price on Gala apples, then going to another store and asking for a price on navel oranges – you can’t accurately compare prices that way.  If other companies won’t meet your quote specifications, they probably don’t want your business.

One word of caution:

A company may quote you the minimum liability coverage, but your car finance company probably requires comprehensive and collision coverage.  Obviously, that quote won’t work in your situation.  Get the right coverage, especially if you’re financing or leasing your car.


3.  What About Complaints: Do People Like a Car Insurance Company?

No company is perfect.  But there are several ways to see if a car insurance company is better than others.  For one, check out Our Reviews.  We periodically review auto insurance companies so you can know whether to compare them with others.

Second, check out our Customer Reviews.  Many consumers just like you have left comments on our forum that describe their experiences with other companies.  That’s a great way to compare auto insurance companies.

A final way to review a company is by their complaint ratio.  State Departments of Insurance usually post complaint ratios on their website for every insurance company doing business in their state.  To research a company’s complaint ratio, look them up at your Insurance Department’s website.

4.  The Intangibles: What Really Matters In a Car Insurance Company?

Now it’s time to decide which quote to go with.  Here’s two final things to consider:

Location? Do you want a 1-800 to call every time you have a problem with your auto insurance?  Some consumers like having a local office to visit – others don’t care.  In the same way, do you want to be able to call the same person every time you have a car insurance question?  Consider the relationship factor when you compare auto insurance companies.

Easy Quote? Did you have a good experience when getting your car insurance quote?  If it was painless, that may be a good sign to consider that company – even if the price is slightly higher.  Service counts.  You don’t want problems if you ever have a claim.  Go with the quick, pain-free quote, over the “hold on, let me ask my manager” quote every time.

In the End, You Could Save a Few Hundred Bucks

Follow these steps, and you’re sure to find a company that will save you money.  Plus, the experience you gain will give you a new perspective on your auto insurance.  It will take some time to compare companies.  But you’ll get compensated once you write that first month’s premium check.

Anything I missed? Leave a comment to help other people shopping for comparing auto insurance companies?

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